Where at one point there were almost 100 million fixed network voice lines in service, there now are perhaps 50 million in service, about half of which are supplied by U.S. cable companies.
Mobile substitution accounts for much of the change. But the changes also should warn us about the growing risk of investing in the fixed network business. The issue is whether the evidence so far shows conclusively that investing in the fixed network at typical rates (14 percent to 19 percent of revenue) is sustainable and even rational in the long term if aggregate revenue does not grow.
To be sure, up to this point telcos have added enough new revenue in the form of entertainment video and broadband access to basically offset voice losses. But telcos are reaching, if they have not already reached, saturation of the broadband access business.
Telco share of video markets still is growing. But even there, there will be some upward limit on market share, and strategically, there is concern about the health of that business over the long term as well.
It might have made sense to regulate telcos one way when the assumption was that they were spinning off large monopoly profits. That no longer is a reasonable assumption.
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